02/15/2013

Portability Provision Extended in Fiscal Cliff Deal

Portability makes it unnecessary for spouses
to use bypass trusts solely to preserve the federal exemption amount. As with
any new process there is a shakeout period, though.

The good news has resounded and
there is much to celebrate with the passing of ATRA 2012 (or the Fiscal Cliff
deal). One particularly positive element of ATRA 2012 is the continuation of
certain estate and gift tax laws.

The fiscal cliff-bridging budget
extended the provision known as “portability.” As you may know, portability is
the ability to pack up the unused tax exemption of the first spouse – that is,
their gift/estate tax exemption – and pass it on to the surviving spouse. The
surviving spouse doesn’t have to worry quite as much about triggering the
estate tax when they pass. Why? Because they now have everything they own plus
everything their spouse left them, and all of it can be sheltered from estate
taxes by the estate tax exemptions of both spouses. However to preserve the
exemptions, an estate tax return must be filed.

The original article has more to
say regarding how to secure this portability. For that matter, portability is
also a limited achievement and a limited kind of protection between married
persons.

There is more to “portability”
and proper estate planning than meets the eye, so be sure to consult with your
estate planning attorney on this matter.